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Tuesday, March 24, 2015 – 10:49
Achara Deboonme
The Nation/Asia News Network

The Supreme Court’s decision last week to order former prime minister Yingluck
Shinawatra to stand trial on May 19 over her government’s rice-pledging scheme was
not unexpected.

But rather than feeling sorry for her or satisfied with her demise, Thai society as a whole
needs to ponder the big picture.

The chief question we need to ask: Are subsidies, now and in the future, necessary for
Thailand? If something goes wrong, who should be held responsible and on what
grounds?

First, we need to realise that Thais are now accustomed to many forms of subsidies.

In the health sector, millions can seek medical treatment for Bt30 (S$1.30) per visit.

In the agricultural sector, farmers enjoy price guarantees plus subsidised-fuel vouchers
and discounts on fertilisers.

Rice farmers enjoy the lion’s share of state benefits, worth about Bt200 billion per year
according to official estimates.

Subsidies are also extended to farmers who grow rubber, cassava, oil palm or even red
onion or garlic. If the world sugar price drops, we can expect sugarcane growers out on
the streets demanding subsidies.

However, the biggest subsidies go to the energy sector.

The most common methods the government uses to keep fuel prices low is to fix them
below the world market rate, to offer grants such as fuel allowances for farmers and
fishermen, to hand out free or discounted fuel (eg, lPG cylinders) and offer tax breaks
for commercial or industrial users.

“Fuel and electricity subsidies are clearly benefiting some consumers, including the
poor, who rely on subsidised liquefied petroleum gas (LPG) for cooking and free
electricity. However, evidence shows that energy subsidies have unintended
consequences for the economy, the environment and social equity. They strain public
finances, encourage over-consumption, and benefit wealthier citizens far more than the
poor,” the International Institute for Sustainable Development said in its report “A
Citizen’s Guide to Energy Subsidies in Thailand”.

Subsidies divert government budget away from productive investment. T

hey also encourage over-consumption that leads to pollution. Subsidised diesel has
proven especially popular among Thais, accounting for about half of all the petroleum
products we consume.

In 2012 alone, the subsidy bill for the energy sector cost the taxpayer an estimated
Bt195 billion.

That amount is more than half of the budget the junta is setting aside for the high-speed
rail link from Bangkok to Nong Khai, and nearly four times higher than the budget
approved last week for water and road projects.

Still, few of us complain about the energy subsidies. One possible reason is that they
benefit vehicle owners, the middle class. Another could be that nearly all of the 50,000-
plus taxis have shifted from oil to gas in the past few years.

Lower gas prices mean lower fares for passengers.

Things are a little different in agriculture.

Farmers who grow other crops cried foul over the Yingluck government’s huge Bt200
billion handout to rice growers.

Well, rice fields account for about 150 million rai of land, compared to just 49 million rai
for other crops combined and 14 million rai for trees (with or without fruits).

Rubber growers also enjoy sizeable aid from the public purse.

The junta government has added an assistance fund worth Bt8.5 billion to the Bt20
billion the Yingluck administration set aside to buy rubber for government investment
stocks.

This is on top of Bt10 billion for a low-interest-loan scheme.

At 22 million rai, rubber plantations cover an area only one-seventh that of rice farms.
Government assistance for rubber growers is one fourth of the amount enjoyed by rice
farmers.

No one is asking who would take responsibility if the Bt10 billion loan scheme turns
sour.

The rice-pledging programme lost up to Bt200 billion annually, or Bt600 billion in total,
according to the National Anti-Corruption Commission and public prosecutors. Few
asked how much benefit actually reached farmers.

Subsidies are mostly politically motivated and few create long-term benefits.

There are exceptions: No one wants to scrap the universal health scheme, as public
health services are a necessity.

Likewise, part of the energy subsidy goes to renewable energy producers, which tend to
benefit the environment on which we all depend.

But generally, it is difficult to single out good subsidies from bad ones, which enables
people in power to continue buying support through public funds. And the beneficiaries
will always keep quiet.

In countries like Thailand that lack the administrative capacity to offer social and
economic support through other policy mechanisms, subsidies will remain a tangible
way for governments to show that they are supporting their people.

Sadly, bringing Yingluck to court will not end this vicious cycle. Worse, the international
community is puzzled that a former leader may be convicted because of a government
policy.

It is unlikely that Obamacare, however poorly planned and executed, will lead to
something similar.

Subsidies will only be done away with when policymakers and the general public as a
whole realise that they do not equate to long-term benefits and that they just pass the
burden onto other sections of the population.

Everybody is footing the bill, one way or another.

Copyright © 2014. Singapore Press Holdings Ltd . Co. Regn. No. 198402868E. All

rights reserved.

http://news.asiaone.com/news/asian-opinions/subsidised-thailand-fools-paradise, accessed 24 March

2015

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